Sasria’s vision is simple: “To protect the assets of all South Africans against extraordinary risks” and since 1979, this innovative organisation has been doing just that.
One of the pillars of strength behind the South African economy is its financial services sector. Widely regarded as some of the strongest and most advanced in the world, South Africa’s banks, insurance companies, credit companies, stock brokers and accountants are leading the way when it comes to developing innovative products and services to meet the ever-changing needs of an ever-changing client base.
In the insurance sector, one of the country’s most important, South Africa boasts some of the highest premium-to-GDP ratios and a wide cross section of well-regulated and innovative insurers. There are also huge opportunities for companies that can market through the correct channels as much of the country remains unbanked and either uninsured or underinsured. In the coming years, South Africa’s insurance sector is set to develop exponentially, unlocking major prospects for the various different players. “This presents significant opportunities for local and regional players, as they look to develop more inclusive products that meet the needs of low-income customers,” states the Oxford Business Group.
“South Africa accounts for almost 80% of all premiums in sub-Saharan Africa and the country has an insurance penetration rate — the total value of insurance premiums as a proportion of GDP — of about 13%, well above the developed world average,” explains the Financial Times’ John Aglionby.
And it’s not just South Africa where the opportunities are attractive. Across the borders, on the continent, the insurance industry is often described as a sleeping giant. “There’s a real buzz about the sector because opportunities are immense,” said KPMG’s East Africa insurance head, James Norman. “There’s a young population, a growing middle class — most with smartphones — and an increasingly large diaspora coming back.”
“The insurance market is closely linked to economic growth. When incomes rise you have more insurable assets,” said Lukas Mueller, head of north and sub-Saharan Africa at reinsurer Swiss Re.
So, the opportunities are large, the customer base is large and, if you can find a niche, you can carve out a space in the market where you become the ‘go-to’ organisation and that is exactly what Sasria has done. Unique in its model and approach, Sasria, a state-owned insurance specialist, offers protection against ‘extraordinary risks’. Obtaining car, home, life or corporate insurance is easy – that’s the bread and butter of today’s big, private insurance companies but what about in extraordinary circumstances? What happens if you are effected by an unruly strike, protest or rally? Or maybe a riot or even a terrorist attack? This is where Sasria steps in.
“Sasria is the only short-term insurer that provides cover to all the people and businesses that have assets in South Africa, as well as to government entities, against special risks such as civil commotion, public disorder, strikes, riots and terrorism, which all have the potential to lead to possible catastrophic financial losses,” the company states.
In a model which is unusual in the market, but perfectly suited to the nature of the company’s mandate, Sasria does not deal directly with the end user and operates through non-mandated intermediaries (NMIs).
“We have a unique business model, since we do not sell Sasria’s products directly to the end-customer. We enter into agreements with other short-term insurance companies who, as NMIs, then represent and sell Sasria’s products to the end-customer, by attaching a coupon related to Sasria’s cover to their own policies. This coupon outlines the Sasria cover that the customer enjoys and incorporates Sasria’s terms and conditions,” the company explains.
Considering the opportunities north of the border, in other African nations, where the industry is still ‘awakening’, could Sasria expand its offering internationally? When I spoke to Managing Director, Cedric Masondo two years ago he said that geographical expansion would come from partnering with South African companies who want to expand in Africa. When these ambitious companies expand, Sasria will make sure they are protected, he said. Of course, expansion like this would have to be run by the company’s shareholder, the SA government.
RIDING THE WAVE
As with all companies, including those that are state-owned, with the current economic climate, you have to be prepared to operate in a cyclical manner, growing quickly when times are good and consolidating and preparing for the upturn when times are more difficult.
The last 18 months have been difficult from an economic perspective for all in South Africa but Sasria was hit hard in 2015 following a spike in the number of strike and service delivery protest-related claims it had to pay out. Interestingly, the number of claims climbed from 1525 to 2349 in the 12 months ending March 15 but the total amount paid out was around R300 million, significantly less than the R507 million paid out in 2013-14.
The annual report for the year ending March 15 contained positive news including the fact that Sasria reduced its expense ratio by 4.7% and increased its solvency ratio by 9%. It has R5.8bn in assets under management and earned R390m in investment income during the year on a return of 7.1%. This caused former Finance Minister, Nhlanhla Nene to name the company ‘one of SA’s top-performing state-owned entities’.
In recent months, the company has seen more growth in claims and Sasria’s Executive Manager: Insurance Operations, Keith Fick says that this highlights the importance of the correct protection.
“Insurance against special events is a vital aspect of any short-term insurance policy,” he told IOL. “Sasria has seen a 54% increase in claims related to events such as protests and strikes in the past year alone, as well as a 25% increase in the severity of these claims.
“We received 1211 claims for the six-month period to the end of September 31, 2015. These originated from events such as service delivery protests, xenophobic attacks, the actions of disgruntled commuters and taxi industry violence. Damage related to the recent student protests is yet to be assessed, but it already amounts to millions.”
“Claims in our latest financial year [to March 2016] will exceed those in the previous year,” Masondo said recently.
A big chunk of the claims will come from the company’s largest every university file. In February two buildings at North-West University were gutted by fire and vehicles were destroyed. According to the higher education & training department, ‘protest-related damage on the Mahikeng campus amounted to R151m bringing total damage at 14 universities to R300m, with a further four yet to tally up their losses’.
Thanks to its carefully planned and well-thought out business model, Sasria is well-positioned to deal with the fallout – in its year to March 2015 the state-owned insurer reported net premium income of R1.38bn and investment income of R390m but Masondo was quick to point out that the company would not be able to weather the storm forever saying: “If the trend continues we may have to raise tariffs.”
All things considered, Sasria is in a strong place. Its position in the market is unmatched and thanks to backing from the government, it is likely to maintain its strong position for some time to come. As the company searches for expansion opportunities, both geographically and with new types of customer, it is likely that the experience and security that the company has built over the years will result in Sasria being very much a part of the growing African industry.